Learning Activity 7

EXCERCISES

DEADLINE: MAY 14, 2021

Exercise 1. True or False

Exempt corporations are subject to MCIT with respect to their income subject regular

1 corporate income tax.

2 MCIT does not apply to foreign corporations

As a rule, corporations always pay tax even if there is a loss effective from fourth year of

3 their operations

Resident foreign corporations are subject to either gross income tax or regular corporate

4 income tax.
A partnership organized under Philippine law is a domestic corporation for purposes of
5 taxation
Domestic corporations are subject to either gross income tax or regular corporate income
6 tax

7 The gross income tax applies only to corporations subject to regular income

8 Non-resident foreign corporation are subject to minimum corporate income 9 The gross
income tax cannot apply if the gross profit rate falls below 45%.
Both the regular corporate income tax and the gross income tax are subject to the

10 minimum corporate income tax.

11 The MCIT applies only when income is zero or when there is an operating loss.
Domestic corporations under the gross income tax, including REITs, are exempt from
12 MCIT

13 Special domestic corporations and special resident foreign corporations exempt from
MCIT

14 MCIT is computed as 2% of the gross income from operations

15 If an entity started operations on June 2011 MCIT shall commence on June 2015.

Exercise 2 . MCQ

1 Which is a correct statement?

a. Domestic corporations shall elect either MCIT or RCIT.

b. Resident foreign corporations are liable to RCIT and GIT.
c. Domestic corporations shall elect either GIT or RCIT.
d. Resident foreign corporations shall elect either GIT or RCIT.

2 Resident foreign corporations

a. shall elect either RCIT or MCIT. b shall elect either GIT or RCIT.
c. are limited to RCIT subject to the MCIT.
d. are subject to IAET and branch profit remittance tax.

3 Which is exempt from the corporate income tax?

a. Non-profit corporations
b. Joint venture
C. Partnership
d. Government-owned and controlled corporations

4 Which of these can claim the corporate OSD against gross income?

a. Private schools
b. Non-profit hospital
c. Exempt corporations
d. Retail stores

5 Which is subject to or can be subjected to MCIT?

a. Private schools
b. Non-resident lessors of aircraft or vessels
c. Non-profit hospitals
d. Exempt corporations

6 Which is not a requisite of the gross income tax?

a. 20% tax effort ratio on GNP

b. 40% income tax collection on total tax revenue
c. 4% VAT tax effort ratio on GNP
d. 10% government debt-to-asset ratio

7 The regular corporate income tax is

a. 30% of gross income,

b. 2% of taxable income.
c. 30% of taxable income.
d. 2% of gross income.
8 The minimum tax for corporate taxpayers is

a. 15% of gross income.

b. 2% of taxable income.
c. 2% of gross income.
d. 15% of taxable income.

9 The MCIT applies to

a. domestic and resident corporations.

b. domestic corporations only.
c. special corporations.
d. non-resident foreign corporation.

10 The optional gross income tax is

a. 2% of gross income.
b. 15% of gross income.
c. 30% of gross income.
d. 10% of gross income.

11 The gross income for MCIT purposes covers

a. those from related activities only.

b. all items of income subject to regular tax.
c. all items of income subject to any tax scheme.
d. any of these

12 The maximum cost ratio for corporations to avail of the gross income tax is

a. 60%
b. 40%
c. 55%
d. 45%

What is the minimum tax as a percentage of gross income under the corpora gross
13 income tax?

a. 15% b. 10%
c. 7.5%
d. 6.75%

14 The minimum lock-in period under the corporate gross income tax is
a. five years.
b. four years.
c. three years.
d. two years

15 The MCIT is not due when MCIT is

a. greater than RCIT.

b. taxable income is zero.
c. taxable income is negative.
d. RCIT is greater than MCIT.

Exercise 3. Short Problems (SHOW YOUR SOLUTIONS)

1. SM Corporation reported the following gross income and expenses in 2020:

Philippines US Total

Gross Income P 400,000 P 300,000 P 700,000

Less: Business Expenses 200,000 150,000 350,000

Taxable Income P 200,000 P 150,000 P 350,000

Compute the income tax due if the corporation is a/an

Q1. Domestic Corporation

Q2. Resident Foreign Corporation
Q3. Non-resident foreign corporation
Q4. Private Proprietary educational institution or a non-profit hospital majority of its income
is from related activities
Q5. International Carrier
Q6. Non-resident cinematographic film owner, distributor or lessor
Q7. Non-resident owner or lessor of vessels
Q8. Non-resident owner or lessor of aircraft, machineries and other equipment